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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (35299)	12/14/1998 10:54:00 PM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 94695

Killing the messenger Monday December 14, 10:16 pm Eastern Time Hedge fund controls may be needed-NY Fed president NEW YORK, Dec 14 (Reuters) - Federal Reserve Bank of New York President William McDonough said Monday that hedge funds which become big enough to threaten the U.S. financial system should be regulated. ''It is clear from Long Term Capital experience that if any hedge fund, or I prefer to call it any highly leveraged institution, becomes large enough to have the possibility to create a systemic risk, such institutions have to be subject to control in the public interest,'' McDonough told the Economic Club of New York. McDonough presided in September over the eleventh-hour rescue of the hedge fund Long-Term Capital Management. He said one way to prevent hedge funds from creating a systemic risk is for their counterparties -- the banks and brokerage firms which lend them money and are already regulated -- to curb their funding. ''They (hedge funds) cannot become as large as that particular fund (LTCM) if their counterparties do not provide a great deal of credit to them,'' McDonough said in response to a question from the audience. The New York Fed chief acknowledged there were great difficulties in directly regulating hedge funds, particularly because a number of them operate offshore. McDonough, who also chairs the Basle Committee on Banking Supervision, said the Bank for International Settlements could provide a leadership role on that issue.